Recruitment firms: Saviours or exploiters?

They are charging employers, and even graduates, for finding unpaid work placements

When Joseph D'Souza left Portsmouth University last year with a 2:1 in Business Economics, he struggled to find a job. After several months of applying with no luck, his father suggested he try interning. Mr D'Souza signed up to job sites including Reed and TotalJobs and was soon contacted by an agency called Inspiring Interns.

A visit to their offices to record a video CV and take various tests soon led to three interviews. Before long, Mr D'Souza, 24, was on a three-month placement at Fetch Media, a mobile marketing agency based in London, which ended with him being taken on full time.

"I'm so thankful to Inspiring Interns," said Mr D'Souza. "I'd probably still be looking for a job if it weren't for them." Mr D'Souza is not alone. A few years ago, internships, once known as plain old work-experience placements, were undertaken by students during summer holidays to gain a taster of potential careers. Now, with youth unemployment rife, for many graduates they have become an essential first rung on the ladder.

It's a shift that has not gone unnoticed among a new wave of recruitment firms. But some have stoked controversy by charging companies for finding the best workies, or even charging the keen-as-mustard graduate for the privilege of slotting them into an unpaid place.

Inspiring Interns, based in central London and founded in 2009, is a leading player in the new "internship industry". Rivals include Instant Impact and Intern Avenue, which launched this summer and recently secured £100,000 of Dragons' Den funding from Peter Jones. All focus on creating internships at small and medium-sized businesses that otherwise wouldn't offer these opportunities.

"Recruitment businesses are evolving", says Ben Rosen, Inspiring's founder. "In essence, we're a graduate recruitment company, but the three-month internships we offer enable the graduate to experience the role within the company and work out whether they like it or not, and on the other side of the coin, whether it's right for the employer."

Companies like Inspiring Interns and Instant Impact, founded in 2011 by two Cambridge graduates, focus on recruiting high-calibre graduates making them attractive to SMEs who otherwise wouldn't have the resources to reach them. Both firms say they invest significant time and effort screening candidates to make sure companies get not only the best but also the right people. Inspiring, which places 20 people a week, makes applicants take personality and metric tests.

"One of the biggest drains on time is finding good employees and it's no different for interns," says John Auckland, director of Thread Marketing Group, who took an intern from Instant Impact. "The fact that something like Instant Impact exists fills a massive hole."

The job prospects of graduates who go through the "intern industry" are good, perhaps unsurprising given that recruiters focus on sourcing top talent. Inspiring boasts that 66 per cent of the 2,000 interns they've placed have been offered a full-time job at the company they worked in, with a starting salary that's on average £1,500 higher than those who have gone straight into a graduate role. But while the majority benefit from the system, some in this new industry have been accused of exploitation. One firm set up last year, Etsio, tried to get potential interns to pay up to £150 a day to gain the appropriate experience and insight.

"If you or your parents aren't interested in paying a couple of hundred quid actually getting some real world experience then I don't think you're very serious," said Kit Sadgrove, Etsio's founder. The company closed two months ago after failing to attract "enough people prepared to invest in their future", he added. Inspiring Interns has also drawn criticism. Campaign group Intern Aware, founded in 2010 by graduate Gus Baker, believe Inspiring takes advantage of interns by charging the company who they're placed with while the intern is unpaid.

"To give [Inspiring Interns] credit, they are good at making money," says Mr Baker. "They make a killing." Instant Impact and Intern Avenue insist businesses pay their interns but Inspiring Interns, the biggest recruiter in the field, only requires that interns are paid travel and food expenses, while they charge companies a £500-a-month finder's fee.

"Our fee comes from finding the right person for the company," says Andrew Scherer, Inspiring's marketing director. "What we're doing is creating learning opportunities."

Inspiring says it is giving graduates the chance to gain valuable skills and experience and the chance of an entry-level job that otherwise wouldn't exist. Mr Scherer says they work closely with companies to ensure that they don't violate minimum-wage law. However, in practice it seems little is done to enforce it.

"Looking back at what I was doing, I wish I was paid," said Meera Badal, a recent graduate who did an internship through Inspiring. "I won business for the company. That was a sore point for me. I was never reimbursed. If it were just a learning experience I would have been there for one or two weeks, just observing. I was getting involved, adding value to the bottom line. In my terms, I was an employee." From an employer's perspective, it makes sense to give work to interns. Mr Auckland added: "Our agency isn't huge, we expect [interns] to be able to come in and pick up quite a high level of responsibility from day one."

Mr Scherer admits that in some cases employers take advantage of interns, but he insists Inspiring does all it can to avoid this.

"We're an intermediary, we do our best to make companies understand their responsibilities but ultimately it's between them and the intern."

Intern Aware disagrees. Mr Baker says: "They're clearly not doing enough. If you look at their website, it looks like they're actively encouraging people to not pay their interns and therefore break minimum-wage law."

Part of the problem is the term "intern". Unlike work experience, "intern" has no legal status in the UK.

Mr Baker's group helps former interns take action against employers who didn't pay. IPC Media, a south London auction house and an international media conglomerate, together paid out more than £2,250 last month to two interns who challenged their employers in the courts with the help of Intern Aware.

"More and more employers are starting to pay interns," says Mr Baker.

However, despite its critics, in the current economic climate and with young graduates desperate not to be left on the shelf, growth in the intern industry shows few signs of abating.